Stop Buying Into Counterfeit Truths: 6 Business Budgeting Myths to Debunk

Many business owners believe that budgeting causes a maximum of frustration and angst for a minimum reward. However, budgets don’t have to be so bad. When done correctly, budgets are a valuable roadmap that can effectively guide a business towards its long-term goals.

Unfortunately, the myths surrounding budgeting continue to thrive. Once business owners realize that budgeting won’t hold them back but rather propel them forward, they can start using these simple tools to benefit their business. Here are six fiscal falsehoods you should debunk to improve your company’s financial health.

There’s only one budgeting method

If a budget is going to be effective, it needs to fit your business’s size, format, industry, and operations. There’s no such thing as a one-size-fits-all budgeting method.

Some businesses benefit from incremental budgets, which allow them to build on the last fiscal period by a given percent. Others do better with an activity-based budget which predicts costs by analyzing activities.

In other industries, a zero-based budget might work best, which would allow the business to build a budget from scratch in each fiscal period.

Other options include value-proposition budgets, sometimes known as priority-based budgets, or flexible budgets that can adjust to changes in volume and activity. To learn more about the options, you can refer to resources like Divvy’s budgeting methods guide (

Budgets take too long to create

Most businesses are already tracking income and expenses using business software. As long as access to that information is readily available, creating a budget shouldn’t take more than a few hours.

Budgets are too inflexible and restrictive to be realistic

Ideally, budgets are a roadmap, not a rule book. These spending guides have to be somewhat flexible for them to be effective.

Businesses might be higher in expenses in one month and higher in revenue in another. The goal should be to identify the big picture. Hitting a budget perfectly in one fiscal period is great, but it’s even better to determine the overall spending pattern for the business.

The business is brand new so creating a budget isn’t feasible

New companies, even small ones, benefit from budgets, but it can be challenging to start from scratch. The key with a new business is to focus on expenses rather than predict revenue.

Pay special attention to business start-up costs, which can be high depending on the industry. Then, set revenue goals that help recoup expenses over time.

Budgets have to be annual

Annual budgets can be helpful because some expenses only hit annually. However, small or new businesses might benefit from shortening the budget period to quarterly or even monthly.

Budgets need to be specific

Expenses for any given fiscal period can be hard to predict. That’s why it’s usually best to use broad categories. Instead of worrying about the cost of every potential flier or advertisement, create a general “marketing expense” category, and leave it at that.

Final thoughts

Budgets don’t need to be overcomplicated or lengthy. When a business owner creates and uses a financial plan effectively, it serves as a beneficial tool to lead a business towards its goals.

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